Recovery Challenges for China Manufacturing Industry after COVID-19

China is gradually recovering from lockdowns and travel restrictions that have been imposed since the beginning of February 2020. In terms of manufacturing, China is back to full capacity and the majority of factories in larger cities across China have been functioning as usual since April 2020, with staffing rates, production capabilities and internal logistics finally returning to how they were functioning before COVID-19.

Challenges for China Manufacturing Industry:

Although manufacturing activity did rise slightly in April, the sector as a whole is experiencing sharp declines and business has decreased. Chinese workers have returned to factories, but operations remain slow because of a decline in demand, cash flow problems and disrupted upstream and downstream supply chains. Meanwhile, China’s foreign trade is also facing great challenges as global economic activity has contracted sharply due to COVID-19, resulting in deceased external business and customer demand. Therefore, the key medium and long-term challenges faced by Chinese manufacturers are deteriorating market demands, supply chain disruptions and rising operating costs.

According to China’s National Bureau of Statistics, the recovery in demand has been weaker than the recovery in production, which is particularly true in sectors like textiles, apparel manufacturing and chemical raw materials production.

Global and Domestic Economic Recession:

The World Trade Organisation estimated that global trade could fall by up to 32% in 2020 due to the damage to the economy from the coronavirus pandemic. As China is dependent on global supply chains and global economy by large, it is not surprising that the Chinese economy is going to decrease substantially in 2020. The International Monetary Fund (IMF) has forecast China’s economic growth rate of 1.2% in 2020, which is going to be the lowest GDP growth rate in China since 1976, imposing a severe impact on the manufacturing sector.

Manufacturing Industry Upgrading and E-commerce:

E-commerce is playing an important role in helping to boost the manufacturing industry in China, especially when domestic demands are still low after COVID-19. As China tries to ramp up domestic consumption amid the economic downturn, it is important for the enterprises of manufacturing industries to adjust their development strategies by taking advantage of e-commerce.

About HQTS

With over 25 years of experience in quality assurance, HQTS is ready to help your business build strong and meaningful supplier relationships across Asia. We will help to define business continuity plans that can respond and adapt to the emerging needs during and post the COVID-19 pandemic. As for our direct services, we will continue to ensure both the utmost quality and timeliness for our clients’ shipments.

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